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ConocoPhillips Wins AHA Gold for Cash Management

As energy company splits in two, treasury clones itself.

Houston-based ConocoPhillips didn’t have to invent a state-of-the-art treasury operation. It already had one, using SAP’s treasury and risk management module within its single global SAP ERP system. But it had to clone that operation quickly and seamlessly when the board of directors decided to split the company in two, making ConocoPhillips an independent exploration and production company with $65 billion in projected annual revenue and putting the downstream businesses into a new company, Phillips 66, with projected revenue of about $190 billion. To minimize the changes, the company decided not to use any new systems or providers. But extensive, complex streams of payments and receipts had to be surgically separated so that each company would be operating securely and efficiently from the go-live date of May 1.

A global treasury separation project team started working in January with the company’s three banks, J.P. Morgan, Bank of America Merrill Lynch and Deutsche Bank. “All receipts and disbursements, including lockbox, wires, checks and ACH activities, had to be coordinated across the various groups,” notes Tammy Burks, director of cash and reconciliations at Conoco. “Because transactions were commingled under ConocoPhillips’ pay-and-receive-on-behalf-of structure, a whole year’s worth of data from more than 700 accounts globally had to be analyzed to identify each bank account’s activity and supporting processes.”

The team scrupulously captured a detailed inventory of every account type, file format, data integration requirement and connectivity protocol, segregated according to which company each would belong to. Bank accounts associated with downstream businesses migrated to Phillips 66, while those that were commingled or associated with the upstream business remained with ConocoPhillips. New accounts were established as needed. It helped that treasury had spent the last three years standardizing transactional processing tools and processes across the globe.

Banks had until April 1 to complete file and connectivity testing. There were challenges. “The cloning of accounts revealed new and unexpected challenges that required finding ways to navigate changes in bank services that were no longer available for deployment within the new organizations,” reports banking director Judy Bouchard.

“The mission was to prepare duplicate systems so that all payments could be processed successfully and all receipts posted appropriately on day one,” says Diana Noteboom, IT business analyst and project manager. “It was crucial that each company’s SAP system could generate separate payment files and properly handle transaction processing for payments and receipts on that date, and we accomplished this.” The systems were cloned, as were bank account structures and the cash management and treasury services staffs.

Cloning staff is harder than cloning systems, but ConocoPhillips came close. It nearly doubled the total size of the cash management and treasury services staff. “The cash management group was essentially cloned, one-to-one,” Bouchard explains, “and the treasury services group’s function changed somewhat for both companies, but we tried to equalize staff. We split the legacy employees pretty evenly and tried to balance depth of experience and expertise. We looked company-wide for talent. We also did some hiring.” Noteboom and Bouchard, for example, remain with ConocoPhillips, and Burks went to Phillips 66.

“The project team and the banks did it all; nothing was outsourced, and no consultants were used,” Noteboom adds.

Read about the Google project that won the Silver in the Cash Management category here, the Visa project that won the Bronze here, and the Cunningham Lindsey project that won the Editors’ Choice Middle Market Excellence Award here.

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